* Weak euro boosts Europe shares after Asian bourses gain
* Short-dated Treasury yields hit highest since October 2008
* Oil dips after rising on U.S. stockpile drop, Turkey threat
* Copper gains before quarter-end and China holiday
* Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh
By Nigel Stephenson
LONDON, Sept 27 (Reuters) - Rising expectations the U.S. Federal Reserve will raise interest rates for the third time this year lifted the dollar on Wednesday and share prices rose as President Donald Trump's administration prepared to outline a new tax plan.
The dollar touched a one-month high against a basket of currencies .DXY and interest rate-sensitive two-year U.S. Treasury yields US2YT-RR hit their highest since 2008 after Fed Chair Janet Yellen said on Tuesday it would be "imprudent" to keep rates on hold until U.S. inflation hit 2 percent. yields US10YT=RR rose a hefty 5 basis points to 2.28 percent, also pushed higher by the prospect of tax cuts that could increase federal borrowing, analysts said.
Markets are pricing in a 76 percent chance the Fed will raise borrowing costs in December. Several other senior Fed officials are scheduled to speak on Wednesday.
"Yellen's comments gave more certainty about another rate hike by the end of the year," said DZ Bank rates strategist Daniel Lenz.
"Further details of Trump's tax plans and whether this proceeds smoothly will be of interest -- it should be a boost to the economy and mean a generally higher bond yield environment."
On the eve of its unveiling, Trump said lawmakers should expect a "very, very powerful document" that would cut taxes "tremendously" for the middle class.
If passed, the plan would be Trump's first significant legislative win since taking office in January. of the long-awaited plan helped lift shares in Asia while a weaker euro pushed European equities higher. A weaker currency is a boon to exporters.
An index of European banks .SX7P rose 1.2 percent and miners .SXPP gained 0.9 percent, buoyed by the strong dollar, as the pan-European STOXX 600 share index .STOXX rose 0.3 percent.
MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.1 percent, after falling for four successive days to a three-week trough.
Tokyo shares, however, fell 0.3 percent .N225
In currency markets, the euro fell 0.4 percent to a one-month low below $1.1750 EUR= . The single currency traded close to $1.21 earlier this month but was rattled by Sunday's German election, which brought the far-right Alternative for Germany (AfD) party into parliament.
The yen fell 0.5 percent to 112.73 per dollar JPY= and sterling fell half a percent to $1.3385 GBP= against the resurgent greenback.
Euro zone government bond yields followed Treasury yields higher. German 10-year benchmark yields DE10YT=TWEB rose 3 basis points to 0.44 percent.
OIL AND METALS
Oil prices were broadly steady after earlier rising on an unexpected drop in U.S. crude inventories and a Turkish threat to block exports from northern Iraq in retaliation for an independence referendum in Iraqi Kurdistan. crude LCOc1 was last down 12 cents at $58.30 a barrel, having hit a 26-month high of $59.49 on Tuesday.
"Going forward, oil is likely to remain supported as supply disruptions, combined with solid global demand, will probably continue to lift prices," ANZ said in a research note.
Copper rose for the first day in six as traders closed positions before the quarter-end and a holiday in China. The industrial metal CMCU3 rose 0.9 percent to $6,471 a tonne.
Gold XAU= dipped 0.1 percent to $1,292 an ounce.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
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